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Crouching Tiger, Tumbling US Economy
Saturday, 17 March 2007 13:44
by Heather Wokusch

"Opportunities multiply as they are seized."
Sun Tzu, Chinese author and military strategist, c. 544-496 BC 

Bush and Cheney may be declaring "Mission Accomplished" now that the Iraqi Cabinet has approved the draft of an oil law granting foreign companies unprecedented access to the country's fields.

But Beijing is having the last laugh.

Just last week, Chinese oil company officials arrived in Baghdad to revive Hussein-era contracts  for developing Iraq's oil, specifically, the Ahdab oil field in south-central Iraq. Hundreds of millions of dollars and a reduction in Iraq's Chinese debt are already on the table.

It wasn't supposed to work this way. The US had a major role in developing Iraq's proposed oil law, with its scandalous long-term agreements enabling foreign oil companies to plunder the nation's most precious resource. Yet despite the US "investment" of more than 35,000 dead or wounded troops and over 400 billion dollars to secure access to Iraq's oil for itself, China is poised to sign the first major contract.

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China also recently announced plans to strategically refocus its one trillion dollar foreign-currency war chest. Rather than continuing to rely on US Treasury bonds, which yield relatively small returns and risk dollar depreciation, Beijing is expected to increasingly snap up natural resources and energy assets across the world.

It's no wonder that China is ditching the US, which currently faces a national debt of almost nine trillion dollars, growing at the rate of $2.04 billion dollars per day. The subprime housing bubble threatens rising defaults and decreased stateside consumption, while the personal savings rate for Americans fell to a shocking negative 1%  in 2006, the worst level since the Great Depression.

It isn't in China's interest for the US to crash and burn economically, but neither is propping up dollar indefinitely, especially if it ceases to be the oil transaction currency standard. The danger, however, is that if China divests of dollars in earnest, other countries will follow suit. The Bush administration's disastrous fiscal policies, not to mention lack of  transparency regarding money-supply data, have already caused Central Banks internationally to begin quietly diversifying away from the greenback.

China's inevitable rise was predicted in a 2005 National Intelligence Council report, warning: "In the same way that commentators refer to the 1900s as the 'American Century,' the 21st century may be seen as a time when Asia, led by China and India, comes into its own. A combination of sustained high economic growth, expanding military capabilities, and large populations will be at the root of the expected rapid rise in economic and military power for both countries."

Which brings up a potential US attack on Iran. In late 2004, the governments of Beijing and Tehran signed agreements valued at up to $100 billion for China to develop and purchase Iranian oil and gas. In the aftermath of a US military strike on the country, the status of those contracts might be called into question.

But as the famed military strategist Sun Tzu once noted, "There is no instance of a country having benefited from prolonged warfare." Instead, he advised waiting quietly as an enemy self-destructs, then sweeping in to reap the profits, an effective plan for Beijing during the Bush years
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